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Owner Occupied Housing in the CPI and Its Impact On Monetary Policy During Housing Booms and Busts

Robert Hill (), Miriam Steurer () and Sofie Waltl ()
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Miriam Steurer: University of Graz, Austria

No 2017-12, Graz Economics Papers from University of Graz, Department of Economics

Abstract: The treatment of owner-occupied housing (OOH) is probably the most important unresolved issue in infl ation measurement. The European Union has been grappling with this problem for over a decade. We argue for measuring OOH costs using a particular version of the user cost method. We then compare the impact of eight different treatments of OOH on the consumer price index (CPI), using quantile hedonic regression. The impact on the CPI is large, and the treatment of OOH emerges as an essential prerequisite to discussions over how an infl ation targeting central bank should respond to housing booms and busts.

Keywords: Measurement of infl ation; Owner occupied housing; User cost; Quantile regression; Hedonic imputation; Housing booms and busts; Inflation Targeting (search for similar items in EconPapers)
JEL-codes: C31 C43 E01 E31 E52 R31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-ure
Date: 2017-11
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Working Paper: Owner Occupied Housing in the CPI and Its Impact On Monetary Policy During Housing Booms and Busts (2018) Downloads
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